After rising 215 points in early trade on positive global cues following a bailout deal for Cyprus, the benchmark BSE Sensex on Monday reversed gains on worries over domestic political developments and ended down 54 points, or 0.29%, at 18,681.42, extending its losses to the seventh day.
The broader NSE Nifty was 0.31% down to 5,634.
Bearish sentiments have dominated markets for a week following the DMK's withdrawal of support to the Union government and Cyprus crisis.
"We had a case for bounce back today. However, political uncertainty dampened the sentiments," said Sunil Jain, vice-president, Nirmal Bang securities. "If political crisis escalates market may further go down."
Most of the Asian markets ended positive on Monday on Cyprus clinching a €10 billion bailout package. The Sensex rose 200 points in the opening session. However, investors feel that it sharply fell when Samajwadi Party supremo Mulayam Singh Yadav expressed his interest in a 'Third Front' led by regional parties in a public meeting.
BSE capital goods index suffered the most losing 1.44% while auto and metal indices lost 0.78% and 0.71%.